Spain

Over the past year, the following significant reforms have been made to Spanish law on direct taxation of individuals: 

Royal Decree-Law 10/2024

Royal Decree-Law 10/2024, passed on 23 December 2024, establishing a temporary energy tax in 2025, was published in the Spanish Official Gazette on 24 December 2024.

The Royal Decree-Law was not ratified by Parliament, and its repeal was agreed during its sitting of 22 January 2025.                                                                                                             

Royal Decree-Law 9/2024

Royal Decree-Law 9/2024, adopting urgent measures in economic, tax, transport, and social security matters and extending certain measures to address situations of social vulnerability, was approved on 23 December 2024 and published in the Spanish Official Gazette on 24 December 2024.

The Royal Decree-Law was not ratified by Parliament, and its repeal was agreed during its sitting of 22 January 2025.

Act 7/2024

Act 7/2024, of 20 December 2024, that amends some of the Personal Income Tax (PIT) Act provisions, bringing in measures to mitigate the economic consequences of the DANA flood in the Autonomous Region of Valencia, and other measures to increase revenue collection, such as, an increase in the savings tax rate.

The most important measures contained in this legislation that affect individual taxation are:

• The increase of the savings base maximum tax rate from 28% to 30%.
• The tax exemption for PIT purposes (and gift taxes) with respect to certain gifts made by companies to their employees affected by the DANA flood and their families.
• The establishment of a specific procedure to obtain a reduction in the amount to be included as employment income in the PIT return when certain retirement or disability pensions are received by mutualistass whose contributions could not be subject to a reduction or deduction in taxable income at the time they were made. 
• A 30% reduction in tax on income from literary, artistic, or scientific works and employment income obtained by artists under a special employment relation, when certain requirements are met.

Organic Law 1/2025

Organic Law 1/2025, of 2 January 2025, introduces measures to the Justice System for efficiency purposes. Since it establishes mandatory mediation (or an alternative method to resolve disputes) before the filing of a lawsuit, within civil, commercial, and social processes, the Law adapts the tax exemption on compensation received as a result of civil liability for personal damages, regulated in the PIT Law, which was applicable only when it was established by a judgement.

As a consequence of this measure, the law provides that it will also be applicable when the compensation is agreed through alternative dispute resolution methods and payment is made by the insurance company.

Royal Decree-Law 4/2024

Royal Decree-Law 4/2024, which extends certain measures to address the economic and social consequences of the conflicts in Ukraine and the Middle East, and by which urgent tax, energy, and social measures are adopted, was passed on 26 June 2024 and published in the Spanish Official Gazette on 27 June 2024. The main tax measures included that affect individuals’ taxation are the following:

• The tax incentives established in the Municipal Real Estate Tax and the Business Activity Tax for the Island of La Palma are extended during 2024.
• The threshold to file PIT returns for taxpayers who obtain employment income from more than one payer if the amounts obtained through the second and subsequent payers exceed 1,500 euros (EUR) is increased from EUR 15,000 to EUR 15,876 with effect from 1 January 2024.
• The reduction applicable to employment income when it does not exceed EUR 19,747.50 and the taxpayer does not obtain other non-exempt income over EUR 6,500 is also increased.
• The tax credit for the obtention of income in Ceuta and Melilla will also be applicable to PIT payers who are resident for tax purposes in the Island of La Palma in tax period 2024.

The corporate income tax (CIT) free depreciation incentive provided for investments in new vehicles and new charging infrastructures for electric vehicles used for business purposes that come into operation in the tax periods starting in 2024 will also be applicable to PIT payers that carry out the economic activities in which the vehicles and charging infrastructures are used. When such vehicles or charging infrastructures are transferred, the tax depreciation that exceeds that which would have been applicable had the free depreciation incentive not been applied will not reduce the acquisition value for the purposes of calculating the capital gain or loss arising from such transfer. This excess will be considered business income obtained in the tax period in which the assets are transferred.

Royal Decree 142/2024

Royal Decree 142/2024, dated 6 February 2024, amends the Regulation of PIT, approved by Royal Decree 439/2007, dated 30 March 2007, regarding withholdings and payments on account.

To prevent workers receiving the minimum interprofessional wage from being subject to withholdings or payments on account, paragraph 1 of Article 81 of the PIT Regulation is amended, indicating the new amounts of employment income to which withholdings and payments on account are applied, based on the number of children and other dependants and the taxpayer's situation.

The Royal Decree raises the minimum amount to apply withholdings from EUR 15,000 to EUR 15,876, which will allow those who earn the minimum wage in 2024 to not have PIT withholdings applied to their payroll.

This modification aims to exempt the minimum interprofessional wage from withholdings; in addition, salaries close to the minimum interprofessional wage will also see a reduction in the applicable withholding.